On November 9, President Donald Trump took to Truth Social and shared an idea around the subject of home affordability – the 50 year mortgage.
While this has been walked back a bit by Bill Pulte, the head of the Federal Home Financing Agency (tasked with overseeing Freddy Mac and Fanny Mae), as one of many options that are being discussed to help more people have access to affordable housing, social media has erupted with people talking about this potential home financing option.
Is a 50 year mortgage the answer to home affordability? What are some of the positive and negative ramifications of a mortgage with a 50 year maturity?
Positives:
Rent is 100% Interest
Rent continues to increase yearly
Principal and Interest payment is Fixed
Amortization Gain (as opposed to an Interest Only Option)
Negatives:
Minimal principal repayment early in the loan
Amortization gain is stunted
Effective payment is higher than a 30 year mortgage
Break Even point is extended
Increased Affordability = Increased Home Prices
Financial Security/Freedom Delayed
Payment vs. Wealth Focused
Temptation to a higher purchase price and payment that will keep a Client from achieving other financial goals.
In this video, and the presentation attached, I will combine my expertise on debt management and on helping my clients integrate ownership of Real Estate with what their long and short-term financial goals are so that we can create financial security that most people cannot even imagine.